Merchants Shift to Mobile Payments

Merchant Warehouse |

September 6, 2012

Getting Paid in America

Since first opening their doors, business owners across the country have worked to find the best possible payment method for their goods and services. While the barter system once reigned supreme, evolving methodologies and technologies would lead to uniformed monetary systems, and later credit card processing networks. Today, merchants are looking to the future of payments, which encompasses contactless payments (NFC, QR, EMV), mobile wallets, and integrated gift, loyalty and reward programs. Without a unified solution, merchants are faced with confusion and with little choice or flexibility. This disruption was the premise of Merchant Warehouse's latest innovation – the Genius Customer Engagement Platform. To see where we came from and where consumer payment options are heading, Merchant Warehouse put together this infographic covering the history, and future, of payments in America.

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Businesses in America are currently involved in a payment switch that is anticipated to make completing transactions via a mobile device one of the most popular methods available. Although this might seem like a major upheaval of the commerce system, it is important to recognize the fact that there have been multiple dramatic payment method changes since the 1400s. In fact, embracing mobile payments is simply the latest in a long history of making it as convenient as possible to pay for goods and services.

The Origins of Payment Methods in America

In the 1400s, the main method for acquiring items and obtaining essential services was to make trades via the bartering system. For example, this enabled farmers to exchange food with basket weavers so that both sides would receive something that they needed. Bartering does still exist today, but its usage is very minimal due to the fact that disagreements often occur regarding each party's definition of a fair exchange.

The Shift to Money

In the early 1700s, the decision was made to begin utilizing a commodity money system in an attempt to begin moving away from bartering. Each commodity was assigned a different value, and this is similar to methods that are used today in order to price valuable items such as gold. However, this system was doomed to fail because it was impractical to transport large enough quantities of commodities when it was time to make a purchase. Due to this, commodity money fell out of favor by the mid-1700s.

The Introduction of Coins

In 1792, lightweight coins were assigned fixed values so that people could purchase goods and services without needing to carry large commodity items such as wheat or gold. At the time, these coins were considered to be a vast improvement, but most people today view them as largely inconvenient when compared to credit cards and paper dollars.

The Introduction of Paper Dollars

Consumers were also introduced to the concept of paper dollars in 1792, and this was the first representative money that was utilized in America. Although modern consumers retain this money in its paper format, it was originally intended to be redeemed at a depository institution or a bank for a fixed amount of silver or gold. The usage of paper dollars has dwindled significantly since 1995 when 60 percent of consumers used cash for each transaction. In fact, only 32 percent were continuing this practice in 2003.

The Rise of Credit Cards

Credit cards first became available in the U.S. in 1920, and they made it easier for consumers to immediately purchase items without needing to have enough money up front. However, it took a long time for this payment method to become as popular as it is today. In 1995, only 8 percent of consumers were using credit cards, and a measly 2 percent were utilizing debit cards. By 2003, 31 percent used debit cards on a regular basis, and an additional 21 percent were taking advantage of credit cards. According to MasterCard, 73 percent of Americans greatly reduced their reliance on cash between 2002 and 2012. Today, credit cards and cash are the top payment methods.

The Future of Payments

Consumers have had the opportunity to make payments from their smartphone by using a mobile payment application since the mid-2000s. In 2011, 12 percent of all mobile phone owners used their phone to make a payment, and 38 percent have done so at some point during the last 10 years. In fact, an astounding 79 percent of tablet smartphone owners regularly utilize their device to assist them with shopping related activities. 

When you consider the fact that smartphone ownership is rapidly increasing, it is easy to understand why industry experts anticipate that mobile payments will streamline payment processing, administrative functions and record-keeping into a single electronic system. This shift is expected to happen very quickly, and an estimated 214 billion mobile payment transactions will be completed by 2015. In other words, it would be extremely wise for business owners to get on board with mobile payments now so that they do not miss out on opportunities in the near future.